Tsogo to roll up its sleeves

Tsogo Sun will re­claim its role as man­ager, as Mar­riott ditches three iconic SA ho­tels in the worst of times

Financial Mail - - MONEY&INVESTING - Adele Shevel shevela@busi­nesslive.co.za

ý The small town of Ma­galies­burg near the Ma­galies­berg moun­tain range went into a panic on news that the Mount Grace Coun­try House & Spa was go­ing to close.

But it turns out that Mar­riott In­ter­na­tional was sim­ply walk­ing away early from its lease to man­age the ho­tel, while Tsogo Sun takes over the man­age­ment of the ho­tel it ac­tu­ally owns, along with two oth­ers.

The in­ter­na­tional ho­tel man­age­ment com­pany also ditched its con­tract to man­age the Protea Ho­tel Hazyview in Mpumalanga, as well as the Protea Ho­tel Dur­ban Ed­ward as the im­pact of Covid-19 con­tin­ues to wreak havoc on the leisure in­dus­try.

All three are iconic in dif­fer­ent ways.

Mount Grace is one of the largest com­mer­cial en­ter­prises in Ma­galies­burg and is a pop­u­lar des­ti­na­tion for con­fer­enc­ing dur­ing the week, wed­dings and week­end get­aways with its close

LOOK­ING UP?

coun­try and in March an­nounced the open­ing of the first pur­pose-built Mar­riott ho­tel.

Von Au­lock says big chains “don’t re­ally make a dif­fer­ence with many of the for­eign book­ings com­ing through our di­rect mar­ket­ing ef­forts in those mar­kets, des­ti­na­tion man­age­ment com­pa­nies like Tour­vest or on­line travel agents like book­ing.com.”

Tsogo also took over man­age­ment of the Ara­bella Ho­tel, Golf & Spa in Her­manus from Mar­riott in March this year.

“We’ve just been a land­lord to th­ese ho­tels. Now we need to get in there and un­der­stand how they run,” he says.

But it will be some time be­fore they open. Tsogo had to close its 103 ho­tels in three days at the end of March be­cause of Covid-19.

Only about 30 ho­tels are open at present, but with very low oc­cu­pancy.

He says lo­cal ho­tels might be able to open this year for the do­mes­tic mar­ket in tourist

Tsogo

Tar­get price: Po­ten­tial up­side: nodes such as Umh­langa, but it’s un­likely the sum­mer sea­son will be saved.

Tourism is not ex­pected to gain mo­men­tum un­til flights are nor­malised and un­re­stricted in­ter­provin­cial travel is per­mit­ted again, and lo­cal op­er­a­tors will have to wait for 2021 to see any mean­ing­ful pick-up in for­eign travel too.

As for the ho­tels it has opened — like some re­gional ho­tels in Kim­ber­ley and Polok­wane — Tsogo says: “It’s a toss-up ... if you open too early, you in­crease your cash burn. If you open too late, you lose money for not op­er­at­ing.” In the larger met­ros, Tsogo has opened up only one ho­tel in each ma­jor city. In Jo­han­nes­burg that’s the Sand­ton Sun, in Dur­ban it’s the Ma­rine Pa­rade and in Cape Town, it’s the Stayeasy Cape Town City Bowl.

Von Au­lock ex­pects the full port­fo­lio to be open within 12-18 months.

Un­sur­pris­ingly, the en­tire in­dus­try is now scram­bling for cash.

Tsogo Sun last month recorded

* Based on an­a­lysts’ con­sen­sus forecast

R1.7bn in ex­cep­tional losses for the full year end­ing March 2020. Over­all, Tsogo’s loss was R1.225bn for the pe­riod, from a small profit of R46m last year.

While Von Au­lock says Tsogo has ad­e­quate liq­uid­ity for the medium term, com­peti­tors like City Lodge and Sun In­ter­na­tional are more frag­ile.

City Lodge has been forced into a R1.2bn rights is­sue to set­tle debt prob­lems — equiv­a­lent to its mar­ket cap­i­tal­i­sa­tion — as it fights off cash flow chal­lenges be­cause of the Covid-19 pan­demic.

Sun In­ter­na­tional is also rais­ing R1.2bn from the mar­ket, in the face of a R1.5bn of­fer for a con­trol­ling stake in the busi­ness from Chilean in­vest­ment house Nueva In­ver­siones Paci­fico Sur.

Sun has panned the un­so­licited bid as an op­por­tunis­tic tilt through the me­dia, given that no firm of­fer has ac­tu­ally been made.

In the mean­time, it has to cut 1,800 jobs and is look­ing to sell land too, to deal with the ef­fect of the pan­demic on its busi­ness.

Mount Grace: One of the largest com­mer­cial en­ter­prises in Ma­galies­burg Mount Grace chalets: A pop­u­lar des­ti­na­tion

The Ed­ward: 111 years old

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